Category Archives: Politics

MERS Exposed I: Process Expert Catalogues Fundamental Flaws

Proposed legislation in Virginia, House Bill 1506, which if passed would eliminate the role of the electronic registry system MERS in that state by requiring every mortgage transfer to be recorded in the local courthouse, is having the salutary effect of exposing more information about this generally less than forthcoming company.

Various interested parties offered testimony about the bill. One particularly interesting presentation came from a process and systems expert, Daniel Pennell, who was operating in a private capacity as a concerned citizen. His presentation raises numerous red flags about MERS.

Bank Board Member Proposes Legislation in Virginia to Change UCC to Help Banks Escape Foreclosure Woes

Earlier this week, we discussed how several measures proposed in Virginia would have the effect of redressing the power imbalance between banks and borrowers in the foreclosure process. One would give borrowers more time to mount defensed (Virginia has one of the fastest track processes in the US); another would require judicial approval for a foreclosure to become final. But the farthest-reaching proposal would force banks to maintain accurate property records in local government offices, which would end the use of MERS in that state.

Not surprisingly, the industry is not about to let this go down without a fight.

To Bailout or Not to Bailout: Mortgage Mess Endgames Emerging

In the last week, several ideas for fixing the housing market have surfaced. One is the Third Way proposal, which appears to be an Administration trial balloon. Predictably, it is yet anther bailout, with plenty of smoke and mirrors to disguise that fact.

A second proposal, from Sheila Bair yesterday, is to establish a “foreclosure claims commission“. This scheme sounds more promising that the Third Way proposal, but is very likely to wind up in bailout territory.

Third is a not-widely-covered plan by Senator Jeff Merkley.

The Merkley proposal is pro consumer and pro investor; the other two are pro bank. Sadly, it isn’t hard to see which is likely to prevail in the absence of public pressure.

What a “Get Tough With China” Stance Would Really Look Like

Before every get-together with China, the US goes through some ritualized complaining (the value of its currency has been the recent big talking point), the Chinese do some sabre rattling of their own, and perilous little of substance happens, except that the Chinese continue to have an economy with a substantial current account surplus, which not only works to the detriment of its major trade partners, but at this scale contributes to financial instability. So in a perverse way, China’s ongoing trade surplus is everyone’s problem.

Pending Legislation in VA Would Give End Use of MERS, Give Borrowers More Foreclosure Defenses

The securitization industry may be about to reap the whirlwind of its failure to take the need for reform seriously. As we’ve indicated, industry incumbents have adopted a denialist approach to widespread evidence of serious documentation problems and procedural abuses, and have fought reasonable, pro investor proposals tooth and nail.

The Washington Post reports on several pending legislative proposals in the state of Virginia, all of which seek to level the power imbalance between the financial services industry and mortgage borrowers. The interesting thing about this pushback is that Virginia is not at all left leaning state. These measures instead appears to result from the fact that it has one of the fastest foreclosure processes in the US.

La Niña as Black Swan – Energy, Food Prices, and Chinese Economy Among Likely Casualites

Reader Crocodile Chuck highlighted an important post at Houses and Holes, an economics-oriented Australian blog. While Australia is reeling from the immediate impact, the broader impact of 2010-11 weather patterns may have much bigger ramifications for food and energy prices in Australia and abroad.

The post focuses on the possibility, increasingly endorsed by top meteorologists, that the heavy Australian rains are the result of a super La Niña, the last of which was seen in 1973-4,the time of the last severe flooding in Queensland. Super La Niñas are hugely disruptive to agricultural production and can have other nasty knock-on effects (some contend the 1917 La Niña helped spawn the 1918 influenza pandemic).

In this case, the damage of a super La Niña will not only increase food costs at a time when price rises and food scarcity are already a major concern, but will likely extend to energy prices as well. That one-two punch would be particularly devastating to China.

Greenspan Put, aka “Be Nice to Banks”, Trumped Recognition of Housing Bubble in 2005

In an interesting bit of synchronicity, we’re getting other “how did we get there” snippets from the global financial crisis today. Bloomberg reports that the Federal Reserve actually did see that a housing bubble was underway, but stuck to its guns of measured interest rate increases. The problem is that its account is far too kind to the Fed and comes awfully close to being revisionist history:

Federal Reserve staff and policy makers identified a housing bubble in 2005, and failed to alter a predictable path of interest-rate increases to slow down the expansion of mortgage credit, transcripts from Open Market Committee meetings that year show….

The FOMC in June heard presentations from staff economists, with some raising alarms about housing markets, the transcript shows. Those warnings didn’t translate into a more aggressive policy. The committee raised the benchmark lending rate a quarter-point at that meeting and said “policy accommodation can be removed at a pace that is likely to be measured.”..

SIGTARP on Citi Rescue: Ignoring a Bomb That Has Yet to Be Defused

On the one hand, I must confess to a “I love the smell of napalm in the morning” response to reading the SIGTARP report on the extraordinary assistance extended to Citigroup, starting in November 2009. The well-documented, blow by blow account, taken from the perspective of regulators, dovetails neatly with the reports here and on other blogs during those fear-filled, gripping times. (As an aside, frustratingly, the media is treating some factoids in the account, such Citi’s reliance on over $500 billion of uninsured foreign deposits out of a $2 trillion balance sheet, as news, when it was noted repeatedly in the blogosphere, particularly here).

But on the other hand, the SIGTARP report is annoying, in that it fails to connect some critical dots, diminishes the importance of its key finding, and is far too complimentary to the officialdom.

Should We Buy Geithner’s Resistance to Naming “Systemically Important” Firms?

According to the Financial Times, Treasury Secretary Timothy Geithner is trying to duck the assignment given the Financial Stability Oversight Council under the Dodd Frank legislation, namely, that of identifying “systemically important” financial institutions:

Tim Geithner, the Treasury secretary, has questioned the feasibility of identifying financial institutions as “systemically important” in advance of a crisis, just as the regulatory council he chairs is supposed to start doing precisely that…

DC Puts Its Bankster-Friendly Solution for Foreclosure Fraud on the Table

We’ll analyze a proposal to fix the foreclosure mess put out by a DC think tank known as Third Way. Normally this blog steers clear of delving into random policy documents. In this case, though, it is likely that Third Way is speaking for the administration.

Third Way is an influential think tank whose board is composed of a special Wall Street-type – the Rubin Democrat. These people sit at the nexus of politics and finance, and are conduits for big bank friendly information flow into the administration and Congress. The President of the think tank, Jonathan Cowan, was the Chief of Staff for Andrew Cuomo at HUD in the 1990s, and Third Way is well known in policy circles for delivering ‘politically safe’ and well-packaged conventional wisdom. Oh, and one more thing – the new White House Chief of Staff Bill Daley, who just left the most senior operating committee of JP Morgan, was on their Board of Directors.

So by looking at this proposal, we are looking at the state of play among high level policy makers in DC, particularly of the New Dem bent. This is how the administration will probably try to play foreclosure-gate.

Their proposal, not surprisingly, is yet another bailout.

Richard Alford: Why Has the PPIP Scandal Been Swept Under the Rug?

By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. I long ago stopped reading the reports by SIGTARP and ceased following Treasury’s PPIP program. It was a mistake. […]